Mobile money in bangladesh

European Journal of Developing Country Studies, Vol.4 2007
ISSN(paper)2668-3385 ISSN(online)2668-3687
www.BellPress.org

Mobile Money In Bangladesh
Mohammad Nayeem Abdullah (Corresponding author)
School of Business, Independent University Bangladesh (IUB) Chittagong
Minhaz Complex, 12 Jamal Khan Road, Chittagong – 4000, Bangladesh

Atiqur Rahman
School of Engineering and Computer Science, Independent University Bangladesh (IUB) Chittagong

Rahat Bari Tooheen
School of Environmental Science and Management, Independent University Bangladesh (IUB) Chittagong
Abstract
This paper briefly looks at the use of mobile money in a selected non-urban area of Bangladesh. The use of
mobile technology for monetary transactions is gaining prominence in Bangladesh. Some mobile phone
operators along with designated banks have started to offer mobile banking services, and the Bangladesh Post
Office has also joined this trend. A survey was conducted using a questionnaire containing open and close-ended
questions regarding selected aspects of mobile banking. The survey results have shown that the residents of the
study site use mobile money for a variety of transactions related to the personal and professional lives. However
the results cannot be generalized to the whole of the nation since the survey was carried out at one study site.
There is a scope to replicate the survey in other parts of the country to obtain a more complete picture of the
mobile banking scenario in the country.
Keywords: Mobile Money, Mobile Banking, Currency, Bangladesh

1. Introduction
A large majority of phone subscribers live in developing countries (UNCTAD, 2008). Though mobile phones
make communication easier resulting in economic growth, they can also be useful for other innovations, one of
which is mobile banking (Must and Ludewig, 2010). Due to the increasing penetration of mobile phones into
rural communities, mobile payment options can bring formal banking services to the rural communities (Medhi,
Gautama and Toyama, 2009). Mobile money is a tool that allows individuals to make financial transactions using
cell phone technology (Jack and Suri, 2011). Mobile money is a form of electronic money, where real money is
converted into e-money, and put into mobile devices. This mobile currency can then be transferred from one
mobile subscriber to another, making funds transfer among individuals easier. In other words it is simply another
way to send money. It is a transfer of money to a receiver in which the funds are deposited into a mobile or
“virtual” wallet. A mobile wallet is an electronic account that is linked to a person’s mobile phone in which
money can be electronically deposited and used the same as cash. Internationally, M–Wallets are used to pay for
goods at stores, pay for public transportation, make donations and pay bills. Today, consumers have a variety of
ways to send and receive funds or money transfers. Although using cash to send a money transfer is the most
popular method for most people, more and more people want additional options: to send and/or receive funds on
the internet, over the phone, and now, on their mobile phones.
Firms such as Western Union’s service will offer several variations----- and is unique in offering consumers
options in how they send or receive funds over the mobile. Consumers can send funds:
• Cash-to-mobile: A consumer initiates a money transfer by submitting cash at a Western Union Agent
location. The funds are sent to a receiver whose mobile operator offers mobile money transfer in
partnership with Western Union. Funds are deposited into the receiver’s mobile “wallet”, or account
tied to the mobile phone.
• Mobile-to-cash: A consumer whose mobile operator offers mobile money transfer in partnership with
Western Union uses his/her phones to send a cross-border money transfer. The sender notifies the
receiver via SMS or phone that the funds have been sent and provides the MTCN. The receiver then

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picks up the funds at a Western Union Agent location.
• Mobile-to-mobile: A consumer whose mobile operator offers mobile money transfer in partnership
with Western Union uses his phone to send a cross–border money transfer to a receiver whose mobile
operator also offers mobile money transfer in partnership with Western Union. The funds go directly
into the receiver’s mobile “wallet”, or account tied to the mobile phone.
According to LIRNEasia (2009), 95% of the poor in Bangladesh have used a phone in the last 3 months while
82% have used a phone in the last week. If the figures quoted here have a high degree of accuracy reflective of
the ground reality, then the poor will benefit from the mobile money transfer system, which enables clients to
send a small amount of money through a short message system (SMS). Mobile phones may not only reduce the
cost of financial transactions for provider and customer, but also allow new entrants to the financial sector, and
new relationships to be established for distributing services (Porteous, 2006).

2. Background
Banglalink a leading mobile operator, in partnership with Dhaka Bank Limited and money transfer company
Western Union launched an international mobile money transfer service on Wednesday targeting seven million
Bangladeshis abroad. The service launched will facilitate speedy transfer of money from almost every country to
Bangladesh. Banglalink users with Dhaka Bank accounts will be able to send money through Western Union
from more than 200 countries and territories, a press statement said. The recipients will have access to their
money from any of the over 1,700 Dhaka Bank accredited Banglalink mobile cash points that are open till 8pm
everyday. In future, this service may also be used in local fund transfers, utility payments and train ticket
purchase. “The new service is set to open up access to basic financial services.” Khondker Fazle Rashid,
managing director of Dhaka Bank, said, “The international money transfer system will create a new dimension in
remitting money through legal channel.” Ratheesh Kumar, regional vice president (South Asia & Southeast Asia)
of Western Union, said the company is celebrating its 160th anniversary and has been moving 'money for better'
for more than 135 years. Bangladesh has grown to be the world's seventh largest remittance-receiving country.
Remittances make up 9.6 percent of the country's gross domestic product, it added.
2.1 Mobile Banking
Recently some banking companies and mobile network providers have launched mobile banking in Bangladesh.
A new door of technology is opening in Bangladesh. Now people of Bangladesh can use their mobile phone as a
bank account with balance transfer, payment, money upload and many more facilities at a low cost. bKash
Limited is a joint venture between BRAC Bank Ltd., Bangladesh, and Money in Motion LLC, USA. Ensuring
access to a broader range of financial services for the people of Bangladesh is the ultimate objective of bKash. It
has a special focus to serve the low income people of the country and promote sustainable micro-savings to
achieve broader financial inclusion by providing financial services that are convenient, affordable and
reliable. bKash is working both as an extension of BRAC Bank and as a full-scale mobile phone-based payment
switch. This will highly benefit the country as 83% of the population lives under $2 a day and access to finance
can help in improving their economic situation. Less than 15% of Bangladeshis are connected to the formal
financial system whereas 44% of the total population uses mobile phones. Providing financial services using this
mean can make the service more accessible and cost effective for the vast population of Bangladesh.
2.2 Bangladesh Post Office (BPO) with Banglalink
Bangladesh Post Office (BPO) Sunday (June 27, 2010) extended its Mobile Money Transfer Service to 606 post
offices throughout the country to ensure easy and fast money transfer, official sources said. BPO Additional
Director General AKM Shafiur Rahman told the FE, "Today we have started to provide Mobile Money Transfer
Service at 606 post offices that will cover all districts, upazilas and some selected sub-post offices across the
country.""With a view to providing money order service to mid-income and poor people, we have introduced this
service with half the traditional money order service cost. The customers will get this service through mobile and
web." BPO started Mobile Money Order Service in 104 post offices including those in district towns, some
important upazilas and sub-post offices on May 5 last, he said.
He said, "We have a plan to cover 1,400 post offices within December this year and 8,500 post offices across the
country by June 2011." "Speedy money transfer is the demand of the day. Now anyone can send money within
two or three minutes through this mobile-based money transfer service while manually it takes at least three to
five days and even seven days.For the mobile-based system, the post offices will charge Tk 20 for the first Tk
1,000 and Tk 10 for each of the next Tk 1,000. Besides, Tk 7.0 will be charged as electronic cost. Anyone can

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send money order worth Tk 10,000 in the maximum at a time.
To avail this service, an interested sender will have to fill up a form mentioning his or her name, address and
mobile phone number and also the name and address of the recipient. The money order issuer post office will
send the data to the central server, which will in turn send an automatically-generated personal identification
number (PIN) through a short message service (SMS) to the mobile phone of the sender. The sender then will tell
or send the PIN number to the recipient through SMS. However, a secret code for the recipient is a must for
withdrawing money from the post office nearby. The BPO has signed an agreement with Banglalink for the total
connectivity of the service.

3. Literature Review
Electronic commerce (e-commerce) is the conduct of commercial transactions over electronic networks (OECD,
2002). It is viewed as a way to reduce friction in the marketplace, allow larger volumes of transactions to take
place and effectively expand markets (Zainudeen, Samarajiva and Sivapragasam, 2011). Although e-commerce
takes the form of commercial transactions facilitated over the Internet in developed countries, it is now being
conducted in developing economies using mobile networks because of their growing usefulness (ibid, 2011).
Mobile banking is one of the numerous applications that have been developed due to the increasing deployment
of wireless networks and widespread popularity of hand-held devices (Varshney, 2002). In emerging markets
formal banking reaches about 37 percent of the population, compared with a 50 percent penetration rate for
mobile phones (Beshouri and Gravrak, 2010). It is mobile money’s ability to facilitate financial sector inclusion
that gives it its enormous potential for development impact (Jenkins, 2008).
The true potential for mobile money in Bangladesh lies among the poor reveals a research by LIRNEasia (an
Asia Pacific think tank on telecom policy and regulation). LIRNEasia researcher Dr. Erwin Alampay, who led
the research, said the potential of mobile money service could be largely attributed to the innovations by telecom
operators like Grameen Phone. Mobile money is essentially a form of electronic money. Real money is
converted into e-money, and put into mobile wallets. This mobile currency can then be transferred from one
mobile subscriber to another, thereby making funds transfer among individuals, even at a distance, easier, said a
press release. Now by merging the banking and mobile technologies they are ready to offer mobile payment
schemes which Bangladesh poor are certain to benefit from.
According to LIRNEasia's six country 'Teleuse at the Bottom of the Pyramid' study that surveys the tele usage
patterns of the poor 43% participants reported having owned a prepaid mobile phones in their household. This
familiarity with e-reload and top-up and e-load indicates their high-trust rating for this method which can be
exploited when the second wave of mobile applications such as mobile money is introduced in Bangladesh, says
Dr. Alampay, who studied mobile money system in Philippines comprehensively. According to him, Bangladesh
can learn extensively from Philippines experience which is already over five years old. The Philippines is a
leader in many mobile applications, beginning with SMS-use.
It can be used for retail, pay utilities and can be exchanged or transferred from subscriber-to-subscriber. It is this
inter-subscriber transfers which makes m-money's applications for development exciting, the study said.
Besides, there is great interest in tapping the service for international remittances, which can emerge as one of
the most popular and exciting uses of mobile money, it said. The Philippines experience has shown that for a
USD 20 remittance, as much as 6% in transactions costs can be saved. According to the study, like the
Philippines, Bangladesh has a large migrant population. In fact, as much as 10% of the BOP in Bangladesh has
relatives who are international (external) migrant while another 10% has internal migrant relatives.
The role of information and communication technologies (ICT) has been growing in the social and economic
spheres of life (Gatautis, 2008). The use of ICT by organizations and enterprises in improving work processes is
one of the most important opportunities for the application of ICT (ibid, 2008). So this presents an option for the
growth of mobile banking services in a defined area, as has been previously stated. Mobile is the form of
telecommunication that has penetrated the country the most (Zainudeen, 2006). According to Porteous (2006),
the rapid spread of mobile phones means that the number of mobile users may already exceed the number of
banked people in many low income countries. If this is the scenario in Bangladesh, then the opportunities for the
expansion of mobile banking services are tremendous.

4. Methodology
The primary goal of the survey was to extract maximum accurate general feedback in detail from a number of

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rural communities that covers most of the regions of Bangladesh. It might be of importance to note how the
questionnaire for this survey was developed. A draft questionnaire of this particular survey was developed
initially by the concerned researchers. The questionnaire was then shared with additional related researchers and
academics and in this case inputs from renowned consultants were also taken into consideration. A draft final
questionnaire was prepared for a sample survey in more than one focused region. The questionnaire was then
finalized with necessary crucial modifications after pre-testing.
A total of four different regions of Bangladesh were selected to conduct the survey. East Shikarpur village from
Chittagong district, Raichow village from Comilla district, Bazua village from Khulna district and Rotonkhali
village from Rangpur district were selected for this particular survey. A total of sixteen volunteers forming four
different groups interviewed overall 360 individuals from those areas filling up separate questionnaire for each
person as a part of a large field trip undertaken from December 2011 to February 2012. Qualitative research
approach was applied including techniques like focused group discussion and individual activity observation
were also applied to make the result of the study interpretive (Stake, RE 1995). The sample size was not pre-
determined; however, data were gathered from maximum possible participants and secondary sources during the
month long stay in each village forming a rich data set. Raw data from the completed questionnaires were then
collected and put in to customized excel database sheets to construct necessary tables for final data analysis.
Thematic analysis (Miles, MB & Huberman, AM 1994) enabled this research to identify themes from the data.

5. Survey Results
The demographic characteristics of the sample are summarized in Table 1. The sample had 360 respondents with
a 166:189 male: female ratio and the majority aged between 41-50 years. Majority of the respondents (51.6%)
are reported having access to bank accounts one way or another. Only 15.1 % of the respondents had more than 1
SIM whereas 25.5% had no SIM at all.
In Figure 1, 50.8% of the respondents indicated having both sent and received mobile money. Users that send
money seem to be more active, with 72.6% having at least one transaction a month, as compared to those that
receive money, with 61.4% having at least one transaction a month.
In Figure 2, Looking into the primary reasons that respondents use mobile money transfers, “top up mobile
phone” dominated in case of receiving money whereas “Pay for Utilities, bills, fees, etc” dominated in case of
sending money. In both cases, support extended to the immediate family was more than that given to the
extended family.
In Figure 3, most respondents thought that the cost of sending money was cheap or average, whereas most
respondents thought that the cost of receiving money was very cheap.
In Figure 4, Use of mobile money for other types of transactions besides money transfers is emerging. The most
common usage is to buy airtime from your provider as indicated in Figure 4. Other transactions have been
introduced such as payment for bills, etc. When asked about the main benefit of using mobile money for these
other transactions, most (77.7%) responded that mobile is faster than other methods (speed).

6. Conclusion
The survey results show that mobile banking has spread to a selected non-urban area in Bangladesh. The
respondents are aware of the utility of the system and use it for a variety of purposes related to their daily
personal and professional lives. Therefore the acceptance of technology in a non-urban area of the country
appears to have positive prospects. However, the results need to be interpreted with a degree of caution since the
survey was conducted in a single site and cannot be generalized to the whole of the nation. A complete picture
will only emerge after the survey has been replicated in other parts of the country.
Infrastructure reforms are important to economic development, and information-communication is a key
infrastructure (Gamage, 2006). Though mobile phones were once viewed as a luxury item, their rise and global
penetration has been remarkable (Britni and Ludewig, 2010). Mobile phones connect individuals to individuals,
information, markets and services, and bridge urban-rural and rich-poor divides (Aker and Mbiti, 2010). The
penetration of mobile banking technology in the non-urban areas of Bangladesh represents an important aspect in
the economic and social growth of the country. The growing population will at some stage require reliable on site
and off site banking services to manage their finances. Given the pledge of the present Government to build a
Digital Bangladesh, the usefulness of mobile banking becomes paramount. Therefore the next logical step that
should be adopted by the concerned public and private sector entities is to establish the supporting infrastructure

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and requisite human resources that can be employed to take full advantage of the growth of mobile banking in
the nation.

References
www.bangladeshpost.gov.bd
www.banglalinkgsm.com
Aker, Jenny C. and Mbiti, Isaac M. (2010). Mobile Phones and Economic Development in Africa. Center for
Global Development, Working Paper 211, June 2010.
Beshouri, Christoher P. and Gravrak, Jon (2010). Capturing the promise of mobile banking in emerging markets.
McKinsey Quarterly, McKinsey & Company.
Gamage, Sujata (2006). Telecom Policy Research in Asia: A Framework for Assessing Knowledge Capacity.
Version 1.1, lirneasia.net.
Gatautis, Rimantas (2008). The Impact of ICT on Public and Private Sectors in Lithuania. Engineering
Economics 4(59) The Economic Conditions Of Enterprise Functioning.
LIRNEasia (2009). Teleuse at the bottom of the pyramid data booklet. Findings from a six-country study in
emerging Asia.
Jack, William and Suri, Tavneet (2011). Mobile Money: The Economics of M-Pesa.
Jenkins, Beth (2008). Developing Mobile Money Ecosystems. Washington, DC: IFC and the Harvard Kennedy
School.
Medhi, Indrani, Gautama S.N.N., and Toyama, Kentaro (2009). A Comparison of Mobile Money Transfer UIs
for Non-Literate and Semi-Literate Users. CHI 2009 April 4 – 9, 2009 Boston, Massachusetts, USA.
Must, Britni and Ludewig, Kathleen (2010). Mobile Money: Cell Phone Banking In Developing Countries.
Policy Matters, Volume 7(2).
Miles, MB &Huberman, AM 1994, Qualitative data analysis: an expanded sourcebook, 2nd edn, Sage
Publications, Thousand Oaks, Calif.
OECD (2002). Measuring the information economy. Retrieved from www.oecd.org
Porteous, David (2006). The Enabling Environment For Mobile Banking In Africa. Report Commissioned by
Department for International Development (DFID).
UNCTAD, Information Economy Report 2007-2008: Science and Technology for Development - The New
Paradigm of ICT, Geneva: United Nations Conference on Trade and Development, 2008.
Stake, RE 1995, The art of case study research, Sage Publications, Thousand Oaks.Walsham, G 1995, 'The
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in Bangladesh. Information Technologies and International Development, Volume 7, Number 3, Mobile
Telephony Special Issue, 61 – 76.

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Table 1: Demographic Characteristics of the Sample
Rank Financial Transaction Frequency %-Share
Gender Female 189 52.5%
Male 166 46.1%
Cumulatively 355 98.6%
Missing Data 5 1.4%
Age Below-20 62 17.2%
21-30 55 15.3%
31-40 61 16.9%
41-50 86 23.9%
51-60 72 20.0%
Above-60 20 5.6%
Missing Data 4 1.1%
Education No formal schooling 51 14.2%
Incomplete primaryschool 36 10.0%
Complete primary school (P7) 72 20.0%
Incomplete secondary school 27 7.5%
Complete secondary school (S6) 81 22.5%
Post secondary e.g. certificate, diploma, degree 17 4.7%
Degree and above 72 20.0%
Missing Data 4 1.1%
Access to Bank Account No 182 46.4%
Yes, I have a personal account 82 20.9%
Yes, through another household member 41 10.5%
Yes, through work 55 14.0%
Yes, through someone else 24 6.1%
Missing data 8 2.0%
Number of SIM cards 5 SIMs 2 0.6%
4 SIMs 5 0.1%
3 SIMs 7 2.0%
2 SIMs 40 11.2%
1 SIM 212 59.4%

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0 SIM 91 25.5%
Missing Data 3 0.8%

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Mobile money in bangladesh

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